Thursday preview: RBS, BATS, Capita

24th Feb 2010 16:23

It seems like the London stock market has been treading water all week waiting for results from the part-nationalised banks Royal Bank of Scotland (RBS) and Lloyds Banking. RBS is first out of the traps on Thursday and although investment analysts' opinions vary wildly on the likely scale of the company's pre-tax losses, the general consensus is that trading conditions are improving.The Scottish bank has a hard act to follow in Barclays, which issued sparkling profits last week. Expecting Royal Bank of Scotland to post any profit, never mind one matching the £11.6bn notched up by Barclays is, to borrow football argot 'a big ask', with the market expecting an underlying pre-tax loss of £3.85bn. When set against 2008's £40.67bn loss that does not seem so bad, but the bank's accountants will not be cancelling their order for red ink for a while yet by the looks of things, with bad debts and write-offs anticipated to be around £13bn.UBS expects the bank's GBM (Global Banking and Markets) business will have seen the usual seasonal slow-down in the second half of the year while the performance of the core UK/US commercial and retail banking operations will have been subdued, with flat revenues, though impairment charges may have bottomed out.'We expect losses from the non-core division to be significantly lower in H2 09 [second half of 2009] (-£5.4bn) than H1 09 [first half of 2009] (-£9.6bn) and to demonstrate a similar run rate to H2 09 through 2010,' UBS forecasts. 'On this basis, we expect the group full year loss in 2011 (-£2.6bn) to be below 2010 levels (-£6.4bn).' Broker Charles Stanley reckons 'the market will be looking to see whether the positive news regarding RBS's capital position, a stabilising net interest margin and its improved cost:income ratio continued in the final quarter of 2009.' The broker also notes that the bank will be revealing details of a further strategic review which will take account of EC requirements.Charles Stanley predicts RBS's pre-tax loss will be £6.02bn.A number of other companies will be struggling to claim their share of the spotlight on Thursday, among them FTSE 100 constituents British American Tobacco, Capita, Centrica and RSA Insurance.British American Tobacco (BATS), the world's second largest tobacco company, is tipped to announce pre-tax profit of £4,254m on turnover of £14,079m. Income investors will be pleased if the company's dividend breaks through the three-digit barrier; consensus is for a full year dividend of 101.01p, which would put the shares on a yield of around 4.5%.As might be expected of a company with a product that is highly addictive BATS has weathered the recession fairly well, though it has not been immune to its effects; hard up smokers might not give up the habit but they will cut down or switch to cheaper alternatives.Like many other companies, BATS has been reducing gearing, and the market expects the company to announce that net debt had been reduced to around £8.8bn by the end of 2009 versus £9.4bn at the half year stage.Outsourcing giant Capita Group is set to announce a strong improvement in pre-tax profits with the median figure in the range of broker forecasts for pre-tax profit suggesting a figure of £321.0m for 2009, up from £226.6m in 2008. Revenue is forecast to rise to £2.7bn from £2.44bn. The company said back in November that it was on course to meet these expectations but broker Charles Stanley thinks that the company might have seen a slow-down in the rate of organic revenue growth in the second half to 5% from 8% in the first half.'Revenue growth has slowed for two reasons. First the ending of two major contracts, Congestion charging and Dixons. Secondly, problems at Capita Financial Managers, its collectives and investment trust administration business. Despite these events profit estimates have remained unchanged for 2009 and 2010 as the group has pursued efficiencies across the group which has helped the overall group profit margin,' the broker notes.British Gas owner Centrica is expected to bounce back through the billion pound profit barrier after dipping to £0.9bn, excluding exceptional items, in 2008. The market is expecting it to notch up pre-tax profits of £1,756.7m on turnover of £20,489m. As a utility the stock has proved popular with income investors and expectations are that the full year dividend will be around 12.60p, up from 12.20p in 2008, though with its little acquisition spree behind it (Venture Production and the 20% stake in British Energy) the board may feel in a position to be more generous.Insurer RSA could see pre-tax profit tumble to £533.7m from £759m in 2008, on revenue of £6.84bn, down from £7.27bn the year before. The group sounded pleased with itself after its third quarter results, boasting of 'produced another robust performance with our net written premiums again demonstrating the resilience of our strong and diversified portfolio.'The CBI distributive Trades Survey will give a reading on the health of the retail trade. The balance of retailers indicating that sales were higher in February 2009 than in February 2008 is expected to be positive, at +2%, after being in negative territory at -8% in snow-hit January.INTERIMSAshmore Group, Capita Group, Centaur Media, Dunelm Group, Genus, Go-Ahead Group, Hansard Global, Hays, NXT, Redrow, Rubicon Software, Sinclair Pharma, WYGQUARTERLY PAYMENT DATEM&G High Income & Growth Units, M&G High Income Inv Trust Income SharesINTERNATIONAL ECONOMIC ANNOUNCEMENTSDurable Goods Orders (US) (13:30)Weekly Jobless Claims (US) (13:30)House Price Index (US) (15:00)Consumer Confidence (FRA) (07:45)Producer Prices (FRA) (07:45)M3 Money Supply (EU) (09:00)Business Climate (EU) (10:00)Industrial Confidence (EU) (10:00)Consumer Confidence (EU) (10:00)Economic Confidence (EU) (10:00)Service Sector Confidence (EU) (10:00)Consumer Prices (JPN) Industrial Production (JPN)PMI Retail (EU) (09:00)PMI Retail (GER) (08:55)Unemployment Rate (GER) (08:55)Q4Bank BPH GDR (Reg S), Ote ADSGMSCable & WirelessFINALSBBA Aviation, British American Tobacco, Centrica, Communisis, Filtrona PLC, Hunting, London Capital Group, Ote ADS, Rank Group, Royal Bank of Scotland Group, RSA Insurance Group, SEGRO, STV GroupEGMSJSC Sitronics GDR (Reg S)AGMSFramlington AIM VCT, IDOX, Local Shopping REIT, Optos, Sinclair (William) Holdings, Unicorn AIM VCT, Unicorn AIM VCT Series 2, Unicorn AIM VCT Series 3UK ECONOMIC ANNOUNCEMENTSPMI Retail (09:30)FINAL DIVIDEND PAYMENT DATERenew Holdings